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Additional Funds Needed with Excess Capacity

Sales for the year just ended were $400, and fixed assets were used at 80 percent of capacity, but its current assets were at optimal levels. Sales are expected to grow by 5 percent next year, and the dividend payout ratio is 60 percent. How much additional funds (APN) will be needed?

A firm has the following balance sheet (see attachment for better table representation)
Cash 20.00 Accounts Payable 20.00
Accounts Receivable 20.00 Notes Payable 40.00
Inventory 20.00 Long-term debt 80.00
Fixed Assets 180.00 Common Stock 80.00
Retained Earning 20.00

Total Assets 240.00 Total Liabilities and Equity 240.00


Solution Summary

This solution shows step-by-step calculations of addition to retained earning and how much additional funds are needed based on the balance sheet. Explains are included as well as formulas.